Question

Brief Exercise 6-3 x Your answer is incorrect. Try again. In its first month of operations, Marigold Corp. made three purchases of merchandise in the following sequence: (1) 110 units at $9, (2) 420 units at $10, and (3) 110 units at $11. Assuming there are 270 units on hand, compute the cost of the ending inventory under the (a) FIFO method and (b) LIFO method. Marigold uses a periodic inventory system. FIFO (a) Cost of the ending inventory 2970 LIFO (b) Cost of the ending inventory 2430

Answer 1

FIFO

• FIFO stands for First In First Out.
• Under this method of inventory valuation, the oldest purchased inventory items are recorded as sold first in the books of accounts. That is, the ending inventory will always reflect the most recent purchase cost.

FIRST-IN, FIRST OUT METHOD Units Cost Total Ending Inventory Units Total cxb axb Cost of Goods Sold Units Total d dxb $ 110 $ 990.00 260 $ 2,600.00 Beginning Inventory 1st Purchase 2nd Purchase Purchase Cost of Goods Available Less: Ending Inventory Cost of Goods Sold - 110 420 110 640 $ $ $ $ - 9.00 10.00 11.00 $ $ $ $ $ 990.00 4,200.00 1,210.00 6,400.00 160 110 $ 1,600.00 $ 1,210.00 3rd 270 270 $ 2,810.00 370 370 $ 3,590.00

LIFO

• LIFO stands for Last In First Out.
• Under this method of inventory valuation, the latest purchased inventory items are recorded as sold first in the books of accounts. That is, the ending inventory will be valued at the earliest purchase cost.

LAST-IN, FIRST OUT METHOD Units Cost Ending Inventory Units Total с схь Cost of Goods Sold Units Total dxb d - 110 420 110 640 $ $ $ $ Beginning Inventory 1st Purchase 2nd Purchase 3rd Purchase Cost of Goods Available Less: Ending Inventory Cost of Goods Sold - 9.00 10.00 11.00 $ $ $ $ $ Total axb - 990.00 4,200.00 1,210.00 6,400.00 110 160 $ 990.00 $ 1,600.00 260 $ 2,600.00 110 $ 1,210.00 270 270 $ 2,590.00 370 370 $ 3,810.00